Refer to the Following:
a Firm Making Production Plans Believes

question 38

Multiple Choice

Refer to the following:
A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15, and a 20% probability the price will be $20. The manager must decide whether to produce 6,000 units of output (A) , 8,000 units (B) or 10,000 units (C) . The following table shows 4 possible outcomes depending on the output chosen and the actual price.
$$\begin{array} { c c c c } & { \text { Prodi } ( \text { Loss } ) \text { when price is } } \\\hline \text { Prodiction } & \$ 10 & \$ 15 & \$ 20 \\\hline \text { G,000 } ( A ) & - \$ 200 & \$ 400 & \$ 1,000 \\\text { B,000 } ( B ) & - \$ 400 & \$ 600 & \$ 1,600 \\10,000 ( C ) & - \$ 1,000 & \$ 800 & \$ 3,000\end{array}$$
-What is the expected profit if 10,000 units are produced?

• A) $500
• B) $700
• C) $625
• D) $1,000
• E) $1,754

---

Definitions:

Marginal Cost

The cost of producing one additional unit of a good or service.

Total Costs

The complete sum of all expenses incurred by a business in producing goods or services, including fixed and variable costs.

Output

The total amount of goods or services produced by a company, individual, or process within a given time frame.

MC

MC, or Marginal Costs, refers to the cost associated with producing an additional unit of a good or service, highlighting the incremental expense of production expansion.